YB new stock pitches (Fri, Nov 15)

* I use Interactive Brokers link to trade international and OTC stocks (if you can’t trade them in your current brokerage)

* More pitches from Crossroads Capital Fund Letter in “The Rest of the Pitches” section

Nintendo (NTDOY) is poised for substantial growth with the anticipated release of the Switch 2 in early 2025, which will open the ecosystem to AAA third-party games and attract higher-spending gamers. The company's Apple-like iterative hardware model, growing active player base, and increasing digital sales are expected to drive earnings growth decoupled from past console cycles. Nintendo is expanding its IP monetization through movies (with plans for a 'Nintendo Cinematic Universe'), theme parks (four locations by 2025), retail stores, and merchandise. The success of the Super Mario movie has set the stage for future film projects, including Zelda. The company's valuation at 10x P/E (excluding cash) is considered attractive given the potential for significant earnings growth driven by Switch 2 sales, an impressive software lineup, higher prices for Nintendo Switch Online (NSO), and increased revenue from the eShop platform. These factors, combined with the upcoming console release and spring-loaded game sales, position Nintendo for strong risk-adjusted returns over the next three to five years.

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Enzo Biochem (ENZ) has cleared its litigation overhang with a provision made in the financial statements, reducing a major risk to the investment thesis. The company announced a $0.10/share special dividend, representing 9% of its market cap, which may signal a potential liquidation process. The bear case suggests minimal material loss, while the bull case indicates potential upside of over $2/share. ELS momentum has slowed, and the liquidation value depends on cash burn, ELS valuation (1-2x sales), and real estate value (estimated at over $10 million). The dividend may be treated as a return of capital due to Enzo's accumulated deficit. Management's incentives and options packages suggest they believe there is more than $2/share in value. The price target is set at $2.08, with a given upside percentage of 83%.

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* I use Interactive Brokers link to trade international and OTC stocks (if you can’t trade them in your current brokerage)

Hwaseung Enterprise Co., Ltd. (241590.KS) is initiated with a Buy rating and a target price of W12,000, reflecting an expected 432% YoY operating profit growth in 2024 and 56% YoY in 2025. Currently undervalued at a 12-month forward P/E of 10x compared to the peer average of 15x, the company is poised to benefit from Adidas's earnings rebound and increased orders for the popular Originals lifestyle line. As a key vendor for Adidas, Hwaseung Enterprise's order volume is closely tied to Adidas's performance, with profitability dependent on the share of high-value products. The company is expected to see strong top-line growth due to higher order volumes from Adidas and will begin producing more Originals lifestyle products starting in 4Q24, potentially contributing 10% of revenue by 2025. For 2025, USD-denominated revenue is projected to grow 20% YoY, with operating profit margin reaching 6%. Key risks include Adidas's performance and fashion trends.

Read the full article here. Read time: 2 min